Ascott Sells Its Junction 8 and Funan Retail Malls
Singapore Wed Aug 22 -- The Ascott Group has entered into an agreement to divest its prime Funan and Junction 8 commercial properties for S$486 million.
The group has signed a conditional Put and Call Option agreement with CapitaLand Commercial Limited (CCL) to sell the two properties for cash to a party which CCL will nominate.
The exercise of the put and call option and sale are conditional upon Ascott's receiving its shareholders' approval at an extraordinary general meeting.
CCL plans to have the properties form the initial investment for a listed Singapore property unit trust which it proposes to set up.
Junction 8 mall in Bishan commands prime suburban retail rental rates while Funan shopping centre has a loyal following among corporate and retail IT specialists in the region. Both malls boast 100 per cent occupancy.
The sale of Funan and Junction 8 will result in a net gain of about S$81 million for the group. Taking into account the profit from the recent sale of the retail management contracts for the two properties to CapitaLand Commercial, the total net gain will be S$85 million. This total net gain will not have material impact on the group's net tangible assets per share but will increase its earnings per share by 5.5 cents for the current financial year.
The Junction 8 and Funan sale brings the group's total proceeds from non-core assets divested this year to S$618 million. This includes the disposal of The Masters Golf & Country Club in China and the Orchard Point retail podium in Singapore, and the sale of the retail management contracts.
The Ascott Group's chief executive officer, Mr Kee Teck Koon, said: "These divestments pave the way for the next phase of our drive to transform from being the leader in the Asia Pacific serviced residence industry, to a global leader.
"The main driver of our future performance will be our ability to provide a large network of serviced residences in major cities, and operate them with economies of scale. We are looking at acquiring serviced residence chains in Europe, North Asia and Australia where the market yield is higher than the retail sector yield in Singapore," he added.
"We will acquire operational serviced residence portfolios and leverage their management's local marketing and operational expertise to accelerate our earnings growth in the new regions.
"Going forward, we will increase our investment allocations in the developed countries. The lower volatility of these mature markets will provide a stable replacement for our retail sector earnings, as we divest our non-core retail properties."
The group has announced that it will dispose its non-core properties with asset value of about S$1.4 billion by 2003. The proceeds will be used to expand its portfolio to 15,000 serviced residence units from its current 6,000 units, and reduce its long term gearing to about 0.6.
Mr Kee added that as the company grows its international network of serviced residences and global brand presence, it will leverage these to secure more serviced residence management contracts.
The group targets to grow its collection of managed and leased properties to one-third of its portfolio by 2005, to increase its capital productivity and ability to realise value beyond its property assets.
About The Ascott Group
The Ascott Group is the Asia Pacific's largest serviced residence company. Its 'The Ascott' and 'Somerset' serviced residence brands are dominant market leaders in the region.
Created through the merger between The Ascott Limited and Somerset Holdings Limited in November 2000, the group owns and / or manages over 6,000 serviced residence units in 16 cities in 10 countries.
Headquartered in Singapore, The Ascott Group's shares trade as 'Ascott' on the Singapore Exchange. The group is the serviced residence arm of CapitaLand Limited, Southeast Asia's largest listed property company.
Ida Lim, Vice President
Investor Relations & Corporate Communications
Tel: 65867-230 Hp: 9-6288-339 Fax: 62272-220
Dennis Foo, Chief Corporate Officer
Tel: (65) 5867-181 Hp: (65) 9674-4353 Fax: (65) 5867-202